On September 18, 2017, the Consumer Financial Protection Bureau (“CFPB”) announced that it had entered into a settlement and proposed consent judgment with a student loan owner and securitizer, and a separate consent judgment with the securitizer’s debt collector. The securitizer has a loan portfolio of approximately 800,000 student loans. According to the CFPB, the securitizer—a collection of Delaware statutory trusts—has no employees of its own, but contracts with third-parties such as the debt collector to interact with borrowers. The debt collector allegedly hired a network of law firms around the country to prosecute collections lawsuits on behalf of the securitizer.
In the complaint against the securitizer, filed with the consent judgment and order in the United States District Court for the District of Delaware on September 18, 2017, the CFPB alleged that these lawsuits were filed with false affidavits claiming personal knowledge of the account records for the various loans being collected when no such personal knowledge existed. The CFPB also alleged that over 2,000 collections lawsuits were brought where the securitizer lacked the necessary documentation to prove that the securitizer owned the loans or where the debt was time-barred. In addition, allegedly more than 25,000 documents were notarized without having been properly witnessed. These acts were alleged to violate the Consumer Financial Protection Act’s (“CFPA”), 12 U.S.C. §§ 5531, 5536(a)(1)(B), prohibition on engaging in any “unfair, deceptive, or abusive act or practice” involving a consumer financial transaction.
Under the proposed consent judgment, filed concurrently with the complaint, the securitizer neither admitted nor denied liability, but agreed to a number of monetary and injunctive terms. The securitizer agreed to: conduct an audit of the 800,000 student loans in its portfolio, refrain from filing collections suits that were time-barred, refrain from filing collection suits without proper documentation, refrain from improperly notarizing documents, pay $3.5 million in consumer restitution, pay $7.8 million in disgorgement to the U.S. Treasury, and pay a $7.8 civil monetary penalty to the CFPB’s Civil Penalty Fund. In a separate consent order with the debt collector, the debt collector—without admitting or denying liability—agreed to substantially the same injunctive terms and agreed to pay a $2.5 million civil monetary penalty.